All of the following are consequences of an economy operating above its potential level except:

Question

Quizplus · Accepted Answer

When an economy operates above its potential level, there is typically an increase in demand for goods and services, which leads to higher prices and inflation. In order to combat inflation, central banks may raise interest rates, making borrowing more expensive and slowing down economic growth. However, this may also lead to a decrease in demand and higher unemployment rates. Therefore, it is unlikely that an economy operating above its potential level would have both low unemployment and stable prices.

All of the Following Are Consequences of an Economy Operating